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Korea equity fund to be sold under MRF

China's Haitong International Asset Management seeks approval to distribute its Korea equity fund on the mainland under the Mutual Recognition of Funds (MRF).
Korea equity fund to be sold under MRF

Haitong International AM, the subsidiary of the Hong-Kong listed Haitong International Securities, filed the request with the China Securities Regulatory Commission (CSRC) on 23 March.

The Haitong Korea Equity Investment Fund is the first ever Korean equity fund for which such an application has been submitted. The Hong Kong-domiciled fund was launched in May 2016. As of the end of February, the fund has an AUM of $33.91m, according to FE.

The fund invests 25.87% of assets in the financial and insurance sector in South Korea, 21.92% in technology, media and telecoms, and 14.67% in materials, according to the fund’s factsheet.

Top 5 Holdings of Haitong Korea Equity Investment Fund


POSCO Chemtech


Koh Young Technology

Samsung Electronics


SK Hynix


Source: FE. Data as of end of February.

Haitong is pursuing the application under the cross-border fund passporting link between the mainland and Hong Kong, despite CSRC’s record of processing them very slowly. In the latest cases of MRF approvals, China’s regulator has taken approximately two and a half years to grant a permission.

Currently, there are nine pending applications for northbound distribution of funds under the MRF scheme (Hong Kong-domiciled funds to be sold on the mainland), including the latest application filed by Haitong. Some were filed as early as July 2015, according to CSRC’s records on 4 April.

Haitong has another fund in the MRF pipeline. On 18 March 2016 the firm applied for an MRF approval of its Global RMB Fixed Income Fund. The first review of the application by the regulator is dated 12 September 2016.

While the nine funds wait in the approval limbo, the six products already approved for northbound distribution and available for sale on the mainland recorded net outflows of RMB 522.7m ($82.9m) in February, the largest since the inception of the programme. It was the third consecutive month of net outflows, although the northbound sales began declining in October last year, after the funds collectively gathered RMB 2.08bn of new assets within the single month of September.


Three-year performance of Haitong Korea Equity Investment Fund versus its peers

Source: FE. Fund NAV is converted in US dollars for comparison purposes.

Part of the Mark Allen Group.